Thursday, 24 November 2016

The Confederation of Zimbabwe Industries (CZI) has sensationally claimed that local industry is on a rebound despite the worsening economic situation in the country that has seen gross domestic product growth being slashed by half this year.

In a surprisingly optimistic survey released yesterday, the industry body said manufacturing weighted capacity utilisation jumped significantly by 13,1 percentage points from 34,3 percent in 2015 to 47,4 percent in 2016.

“This is a very positive development largely resulting from the moves on the part of government to protect local industry and the import priority list,” CZI senior economist Dephine Mazambani-Mutafera said.

Market experts, however, said the CZI survey results were not a true reflection of the reality on the ground.

“What really does capacity utilisation mean in this context? Because if we are looking at companies whose machinery is 25 years old as fully-capacitated we may have a problem,” one of the attendants at the survey launch queried.

Zimbabwe’s economy has taken a back foot since the July 2013 elections that extended president Robert Mugabe’s rule under controversial circumstances. Deflation has taken root as consumer demand shrinks and the economy struggles with a shortage of dollars.

The International Monetary Fund recently said the country has descended into full-blown recession.

Once bustling factories in Harare are now rusty shells, devastated by the 1999-2008 recession that cut GDP by about half.

In addition, the mines are reeling from the fall in commodity prices and a drought has left 5,5 million people needing food aid.

Formal unemployment stands at more than 80 percent and power shortages are getting worse.

Mazambani-Mutafera said of the respondents who had been surveyed, about eight percent were operating at 100 percent, highlighting that in terms of region, the average capacity in Harare stood 48,3 percent, Bulawayo 44,3 percent and Manicaland 43 percent. She added that respondents had also indicated that a small percentage of the surveyed companies had found government’s recent import restrictions positive.

“At the same time it is notable that only 20,7 percent of respondents viewed SI 64 as positive. This seems to indicate that the overriding concern of industrialists is the uncertain macro-economic environment,” she added, indicating that the survey did not analyse the quality of capacity as measured by age of equipment and other factors.

The CZI chief economist also said 77,1 percent of the survey’s respondents had rated policy instability as negative or very negative for the economy.

“In addition, 73 percent feel that the government and/or business member organisations (BMOs) are not improving in private- public dialogue consultation with the private sector to address economic challenges.

“Sixty percent of the respondents do not know of any public-private dialogues or consultations conducted by government or BMOs in the past 24 months to address economic challenges,” she said, adding that there was need for both government and the private sector to accelerate initiatives for broad-based macro-economic stabilisation.

The study’s findings also showed that about 24 percent of manufacturers had retrenched as a result of the deteriorating economic environment as well as part of restructuring as 76 percent did not retrench.

South Africa remains the biggest competitor for local manufacturers, with 38 percent of respondents singling the neighbouring country as the biggest threat to their businesses followed by China, India, Brazil and Zambia. Daily news